Mark Barnett has faced fresh pain in his portfolio as his shares in two biotech firms fall fresh after defending the positioning and liquidity in his portfolios.
Tissue Regenix shares were down 41% by midday on Monday trading at 1p per share as it revealed it expects to fail a covenant test linked to a loan and revolving credit line it has with Midcap Financial Trust.
Mereo Biopharma’s share price also fell, dropping 28% to 37p, due to disappointing results in one stage of the clinical trial tests for a drug that is an anti-sclerostin antibody.
Invesco and Woodford significant shareholders
Both biotech firms count Barnett as one of their largest shareholders.
Barnett is the biggest investor in Tissue Regenix, owning 28.8% of the issued share capital as at 25 October 2019, according to the company’s website.
He also owns 19.6% of Mereo Biopharma or 19.1 million shares, making him the second largest institutional investor behind Link Fund Solutions. Link is the authorised corporate director for Neil Woodford’s Equity Income fund, currently in wind down, and Income Focus, which is currently suspended.
The hit comes fresh after Barnett defended the positioning and liquidity of his portfolio as he invests in smaller-cap names.
Last week Morningstar downgraded his £6.1bn Invesco High Income fund with analysts citing concerns over Barnett’s overweight positions in small and micro-cap stocks despite the fact “his skill-set lies more in investing in larger and mid-sized companies”.
Both Tissue Regenix and Mereo Biopharma fall on the smaller end of the cap spectrum with the former valued at £14.1m and the latter worth £36.2m.
Barnett has continued to defend his positioning, responding to the Morningstar downgrade in an uncharacteristically public way by telling investors that he has cut the total exposure to unquoted investments across his funds by half to £493m.
Redemptions hit Barnett’s funds
He emphasised that his portfolios “have chartered a very different course” since he took over for Woodford in 2014 and that he invests within a different risk and oversight framework.
Like Woodford Equity Income, Barnett’s funds have also suffered redemptions, threatening to bring the level of his unquoted and micro-cap holdings higher.
By the end of August, the £2.8bn Invesco Income fund had seen net outflows year-to-date of £477m with two fifths of those redemptions happening after Woodford’s fund was suspended in June.
Portfolio Adviser reached out to Invesco but did not hear back in time for publication.
